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Business Process Engineering At Proctor And Gamble Commerce

In 1993, Edwin Artzt (Procter Gamble CEO) referring to Business Process


Reengineering (BPR) happening within his organisation, described it as an approach and
method where we are going to take this place apart brick by brick and put it back
together again. (Hammer, 1996 p. 4) Translated in simple and sharp words, the statement
above meant BPR works when each single individual organisation`s process has been
deeply and separately analysed, assessed in view to obtain a fresh fertile ground for the
creation of radically new reinvented processes, achieving dramatic improvements in
performance. (M. Hammer, 1995)
Michael Hammer and James Champy (1993) adopted new revolutionary visions and
approaches to business processes, in view to lead an organization to a major change and
ability to face market continuous transformations; they both acknowledge dramatic
performance achievements are the result of radical implementations, and changes of set of
activities within a business.
These last twenty years have seen consolidated organisations operating in various markets
adopting a BPR approach to gain profitability through a reconstruction of the organization
itself, too.
Once it is understood that people have not just been reading about reengineering, they
have also been doing it (M. Hammer, 1995, p.XI) it is extremely important to know what
it is and when business process reengineering began.
From a general overview of what BPR primary is to a deep research and related
assessment of how BPR has changed organisations, we are going to specifically analyse
the Italian ski resort organisation Frais 2010; throughout an evaluative and analytical
analyse of the primary data collected using surveys and interviews it will be possible to
understand whether a BPR approach in the business operations could positively affect the
organisation as a whole of systems induced to create services for its customers.
The language used for the collection of secondary data is English, however primary data
had been obtained using the Italian and French language; all surveys and interviews
findings as well as gridlines are translated in English and reported in the tables.
Justification of research
BPR as stated by M.Hammer (1994) is not only for large organisation but can be an
imminent rethinking of processes and management styles within an organisation at start-
up point, too.
Pian del Frais ski resort could be a fertile ground for BPR because it is still not a
consolidated business encountering department divisions, as well as it lacks a proper
departmental structure and the nature of processes involved are most of the time reflected
in daily monotone scheduled works.
Since 2009, a new incoming joint venture, Frais2010 has begun to manage and operate
the ski resort; an implementation of offers, products and services for tourists in the ski
resort is among the main objectives for this company, to gain in a short time period return
on investments and substantially positive growing equities for its business associates.
At the moment there are no academic researches specifically focused on Pian del Frais
and its ski resort managing company, however the author intends to analyse and assess
the ski resort business in view to create a written documentation able to critically assess
the limits and potentials that this business could face approaching a BPR methodology
and project.
Aim and objectives of the research
The research is aimed to discover whether BPR is suitable for an Italian limited ski resort
organization affected by a chaotic business environment: years of operational inactivity
have led the newly established company to an immediate need for work processes and
company systems to move away from old business habits, and to create new systems
and methods to carry on daily field activities and management processes.
AIM
Is a BPR methodology able to improve quality and provision of services within
Frais2010 or is it just increasing its revenues and lower operational costs?
To understand whether the business needs to embrace a BPR methodology of doing
things, it is necessary to primary define the organization`s set of activities, opererations,
the business environment and its resources.
OBJECTIVES
Understand the business environment at Pian del Frais
Identify Frais2010 human, financial and material resources
Assess the value and efficiency of the systems of operations at Frais2010
To finally achieve the set aim written above, it is extremely vital to reach the three
objectives in view to analyse and benchmark Frais 2010 company`s operations, issues
and management strategies with the customer`s willingness to change.
Chapter 2: Review of Literature
The literature review is focused to build up a consistent quantity of relevant and up to
date academic information concerning BPR in view to compare, contrast and analyse
these already existing theories and business practices with the author primary findings.
From a macro study of what in general and academically is BPR the literature review will
focus on a micro view of how BPR is used in the tourism industry, specifically within a
ski resort environment.
BPR what is it
In the last two centuries, industries throughout the World embraced part of Adam Smith`s
theory of the division of labour (The Wealth of Nations, 1776): a whole system conceived
to create a tangible/intangible product is fragmented in many series of works (processes)
involving the introduction of machineries, able to cut down the number of employees,
though, it drastically speeds up the production times and increases the volumes of
production.
Not only A. Smith shaped today`s industrial systems of production but also Henry Ford
(1863-1947) and Alfred Sloan (1875-1966) contributed to develop production in the
actual way we see it now, reflected in how companies do their job.
Henry Ford implemented the fragmentation of works by simplifying each single process
and bringing the work to the worker, A. Sloan implemented Ford`s partitions of work
by setting up small divisions, uniquely assessed and controlled under financial and
productive efficiency statistics by decentralized headquarters.
Both H. Ford and A. Sloan created the pyramidal structure of work and management the
majority of organisations still have on place: parallel divisions are created among
professional labour and manual labour, complex systems are created for budgeting,
planning and control and the outsourcing of workforce is the main tool to grow up the
organisation when higher production is needed.
These theories and work practices led companies throughout the years to focus on
specialist functions rather than on value creating processes.
Untill now, most of the organisations have based their productions in well-defined
systems of processes to comply with high fast pace demands, and requests for
homogenise products or services able to satisfy a global scale of customer`s expectations
and standards.
M. Hammer and J. Champy recognised in their work Reengineering the
corporation(2006) a pyramidal structure is nowadays no more sustainable for any
organisation willing to compete and exceed in the XX century`s market: management and
employees are too far from their customer`s opinions and requirements, sprawling
enterprises have complicated and enormous amounts of bureaucracies just to stretch
power and responsibilities through their hubs, and finally each single organisation has too
many functional/middle managers laying in the middle of the organisation chart.
Companies today consist of functional silos, or stovepipes, vertical structures built on
narrow pieces of a process (Hammer M. and Champy J., 2006 p. 31)
The too stretched, and vertical power pyramidal organisation has created fragmented
processes, and the management prevalently focus on growth and budget cost cutting;
these characteristics do not pay attention to the organisation`s flexibility, responsiveness,
customer focus, results, innovation and costs, for specialised high skilled people able to
join different individual tasks done in functional departments. (Humpy Dumpty School of
organisational management)
Contemporary socio-economic factors (recession, public awareness and consumer rights
enforcement) have changed industrial trends in creating and delivering products/services:
from a globalised market creation of products and services, consumers are now asking,
seeking for real added values, and preferably individuality, within the products/services
they purchase.
In today`s environment, nothing is constant or predictable-not market growth, customer
demand, product life cycles, the rate of technological change, or the nature of
competition. Adam Smith`s world and its way of doing business are yesterday`s
paradigm. (Hammer M. and Champy J., 2006 p. 20)
So, the initial idea and practice companies had to separate workers, in hermetic divisions
able to perform one single set of activities is left behind, to create and empower cross
functional employees/divisions able to run processes in a faster, more flexible responsive
way, and mostly everyone in the company knows the product and can add value for the
customer.
Successful organisations nowadays depend on three major market forces (the three Cs):
customers, competition and change; everyone working in a company is responsible for
the improvement, flexibility and quality of the selling output, to efficiently manage and
face these three modern market forces.
Customers and suppliers are now considered as individuals, seeking for products and
services uniquely designed for their specific needs, trade barriers are falling down and
competition is fierce thanks to national/international deregulations, SME`s and start-up
companies are faster than bigger organisations to introduce new products/services on the
market, information technology and scientific research have diminished the products
lifecycle, promotion and expansion for new products/services now rely on speed and
technology.
Organisations until now have managed and run their businesses as asset portfolios where
employees are fitted within narrowed task-oriented jobs and have no chance to move
from one department/unit to another; in this way no one at lower level is responsible for
the overall production system, the customer service value is limited to a fewer, which
means not so many people are empowered to fulfil customer`s requirements and needs.
That is the reason why not only well established companies but even companies at a start-
up level must reinvent their processes, in view to understand and face their exposure to
the three Cs. The organisation`s flexibility and success to keep up with the external and
internal market forces is achievable when the company knows, how to get the work done
and people work together to invent, make, sell, and provide services. (Hammer M. and
Champy J., 2006)
BPR could be summarised as a methodology to have major changes and transitions in
different structures within two major parts of the company: the technical side (machinery,
processes, operations) and the human resources side (employees behaviour, attitude to
changes). (Cummings T. and Worley C., 2004)
Drastic changes within the organisation can lead to significant, limited, local, widespread,
reversible, permanent outcomes; this is why BPR has impacts across organisational
boundaries, and generally impacts or effects over external suppliers, customers, and as
well on the organisation` structures.
The organization`s commitment to redesign itself introducing new future strategies,
operating-business environments and technical capabilities are the main objectives for a
successful BPR. These changes involve the assessment whether old and new resources
are required, or are just wastage for new systems; the organization power distribution is
object of studies and analysis for the initiation, development and implementation of a
BPR project.
An accounting system, able to follow up the BPR project and its outcomes, is able to
control, reduce and assess the financial benefits and costs related to changes in practice
and behaviours.
Drastic changes, leading to breakthrough improvements to the organization`s system of
activities and practices implicate major investments, and related financial losses due to
temporary abnormality within the delivery performance for products/services.
It is important to financially understand whether the organization is able to undertake a
major investments to bring radical innovative changes within the whole of its operations
and systems or, it is more suitable for the company to embrace a Kaizen vision:
continuous changes affecting single processes and business units, but as well everyone
within the organization.
If it is not financially possible to undertake a BPR project, the company can always aim
for a Total Quality Management methodology. (Slack N., Chambers S. and Johnston R.,
2007 p. 595)
Key Concepts of BPR
A completely fresh start, or blank sheet of paper approach, to organisational redesign
ignoring past history or present structure or practices
A process-orientation approach to organisational analysis centred around a horizontal
review of all activities involved in the process, or set of activities, in the delivery of a
product or service to the customer (Mullins L.J., 2007 p. 764)
BPR is seen as a whole of new processes able to reduce costs of inputs, production
processes eliminating unnecessary activities, where technical, economic, administrative
and accounting aspects are improved and restructured. (The role of BPR in reducing
costs, 2010).
In 1993 Hammer and Champy described this method of production and production
system as:
Reengineering concentrates on the end-to-end business processes to create a real
customer value and eliminates all functional boundaries, which otherwise slow down the
processes and add non real values to the finished product.
BPR is specifically assessing and reconstructing business processes.
A business process is, usually, understood as a sequence of activities, functions or tasks
which leads to a well-defined operational goal (Planning Business Processes in Product
Development Organizations, 2003)
Each single activity involves knowledge, information and materials to transform an input
into an output and, all the activities work simultaneously at the same time, sometimes
overlapping each others and other times synchronised. To manage and control all
activities are efficiently done and deliver an output at a determinate time, a process plan is
required.
Preconditions for a successful BPR Project
BPR Case Studies
Benefits and limits of BPR
At the beginning of all major changes within any organisation we can notice five common
transitional phases inheriting to the past and future dynamic timing of the company:
denial, resistance, awareness, exploration and commitment. (Cummings T. and Worley
C., 2004)
A reengineering failure can be associated to a wrong implementation of information
technology and a misunderstanding of non-clear strategic needs, responded with partial
changes (Clemons E.K, Thatcher M.E. and Row M.C., 1995) and the increasing of direct
and indirect costs, added to the lack of identifying and managing other different risks,
which undermine the BPR project development outcome.
Those risks are:
Financial returns on investments do not repay the changes done within the organisation.
Technical issues new methodologies, processes and machine requirements are not
available or effective.
Functional the BPR outcome is not within the organisation and final users` needs.
Political commitment and efforts are lost along the way of the project and management
levels are not persuaded by the BPR project, too.
At the end, it is important as well to see failure motivations within a human prospective:
workers, specialists and all employees within an organisation prompted to implement
changes, are resisting to changes in fear of job cuts, diminishment of professional
expertise in favour of mechanical/technological machineries and merely non
understanding of the BPR concept.
The use of reengineering processes brings down the costs of inputs and the production
process and the cost of post-production processes (The role of BPR in reducing costs,
2010)
Work that requires the cooperation and coordination of several different departments
within a company is often a source of trouble (Hammer M. and Champy J., 2006 p. 11)
Major barriers to change: resistance to change, Limitations of existing systems, Lack of
Executive Champion, Unrealistic expectations, Lack of cross-functional team, Inadequate
team and users skills, Technology Users not involved, Project charter team narrow.
Individual resistance and denial are due to habit, economic factors, job security, and fear
of the unknown, selective information processing; these issues can be overcome by all
employees within the organisation adopting negotiative, manipulative, co-optational and
coacertive behaviours, creating and enhancing a policy of communication, involvement,
active participation, education, support and facilitation among employees.
Organisational resistance: threat to established power relationship, threat to established
resource allocations, structural inertia, limited focus of change, group inertia; when the
organisation is going through a BPR project, it is extremely important the creation of
separate teams to limit collateral damages by the organisation structure itself, too.
These teams are made to evaluate the political support and reaction for changes by
identified, influent stakeholders, and finally in view to implement the product mix a
group must assess the level of business the customers are doing with a company (agent
power). Analyses and assessments by this group of people are useful to understand how
does changes affect stakeholders and foresee their consequential reaction to BPR.
(Cummings T. and Worley C., 2004)
BPR is seen as an important tool to change company`s strategies in a foreseeable future
and this methodology, used with total quality management (TQM) is an actual
widespread practice management and strategy, used to face and predict cultural changes,
as well as a performance measure. (Mullins L.J., 2007 p. 765)
It also seems that when used in an integrated manner, BPR and TQM can produce a
profile of organisational change characterised by periods of continuous improvement
interrupted by episodes of radical innovation which serve to steepen the overall
improvement/learning curve.
(Mullins L.J., 2007)
A geographical, economic description of the location
Pian del Frais (Frais) lies in the Northern Italian region of Piedmont, it is a small ski
resort part of Chiomonte County which have been in the 1970`s an important and growing
centre for Winter sport activities, and a holiday destination for local inhabitants living in
Valle di Susa and Turin.
Throughout Italy and Europe Piedmont is known for its industrial creativity and car
industry; many Worldwide organisations started their businesses right in Turin and
neighbourhood towns such as FIAT automobile, Ferrero chocolate, Pininfarina and
Giugiaro designing.
Tourism has recently played a key factor for Piedmont to project itself over the Italian
Alps, the history, the arts and the sporting-cultural happenings have created the
opportunity for Italy, and particularly the City of Turin to host the Winter Olympic
Games in the year 2006.
During the Olympic Games various alpine locations had been chosen as hosting and
training venues for the competing National teams. Pian del Frais has seen the American
team with Ted Ligety and Bode Miller training on the slopes in view of the super-G races.
Throughout the years, Pian del Frais although being chosen as a training location for the
Olympic Games, has fallen into a rapid decline due to various social, political and
financial issues, which have pushed its inhabitants and investors to close businesses or
disinvest in local economic activities.
The private owned ski resort organisation operating at Frais did not operate the business
for five years because of climatic unforeseeable constraints, a major lack of economic
resources and commitment of private and public investors.
The few local business activities related to the skiing industry have faced a high economic
recession and the overall morale of the mountain resort inhabitants has perished
throughout those years, creating a consequential backlash effect on potential incoming
investors and local authorities.
Since 2009, an incoming new joint venture managing and operating the ski resort has
begun to implement the offer of products and services for tourists but, it is still far away
from gaining a short time return on investments and obtains substantial equities for the
business associates.
Vision, Values and Core Business
Stakeholders
Organisation structure and behaviour
Associazione Frais 2010 is a private organisation owned and managed by a group of
business partners, willing to run and implement the already existing ski resort at Pian del
Frais.
The organisation originally
Identifying resources and operations within Frais
2010
All private and public organisations deliver a product or service (output) using
transformed and transforming resources (input); people would eventually buy the final
output not because of its tangible or intangible characteristics but because of the values it
has in creating a benefit.
Throughout a set of activities, together called operations function or generally speaking
operations or processes, transformed resources (materials, information, customers)
and transforming resources (facilities, employees) generate, by the way these are
elaborated, a specific product or service for internal and external customers of the
organisation. (Slack, 2007, p. 4)
When Slack defines processes does not go far from M.Hammer (1996, p.4)`s theory: a
process is the whole of tasks effectuated to generate a value for a customer.
All organisations have three core functions (marketing, product/service development,
operations) which create support operations able to meet customer`s needs, demand and
selling objectives. All set of activities within an organisation are divided in internal
suppliers and internal customers, sharing and adopting mutual objectives at different
stages, to cooperate following a specific hierarchic pathways. (Slack N., Chambers S. and
Johnston R., 2007, p.18)
The organisations designs and operate functions to reflect its activities domain: culture,
strategy, structure, power distribution and control system (Romanelli, 1996). The success
of the output depends on the company`s ability to manage and predict the volume, variety
and variation of its processes, according to the level of demand on long/short term
objective strategies.
Operations managers main role is to ensure processes are designed, and controlled to
meet the organisation`s objectives at competitive levels, positioning its products/services
within a continuous changing business environment.
The identification and assessment of internal and external factors such as sustainability,
social responsibility, environment, globalisation and technology play an important role in
the manager`s commitment, to reorganise organisational responsibilities and process
boundaries (BPR). Doing so, managers reach high performances in quality delivery, and
operations improve their speed, dependability, flexibility and an overall minimization of
costs and losses. (Slack, 2007, p. 21)
Pian del Frais ski resort, as well as all the other ski venues around the World is extremely
affected by the number, variety and type of natural, artificial resources it can exploit for
its business operations.
A ski resort is generally chosen by tourists for its total length (in kilometres) of ski runs,
variety of ski slopes (levels of difficulty, off-piste, grooming), services (public/private)
and natural features such as the landscape and the presence of woods and small glaciers.
These natural and artificial attributes of the ski resort as a whole of slopes, facilities are
relevant to the customer`s willingness to pay a set fee for the enjoyment of the location
and vacation; variable added values to the ski resort are the presence of shuttle bus
services linking different locations, the onsite accommodation`s location, type and
quality, activities and services offered to a general or niche market which is not always
using the ski lift tickets. (Falk M., 2008)
lift ticket prices to have a significantly positive correlation with lift capacity. In order to
measure lift capacity, we first calculate the vertical transport metres per hour for each lift
Frais 2010 stakeholders
Chapter 4: Research methodology
The research is based on contemporary business management issues affecting the ski
resort, and these are object of tourism and management studies within recent published
academic literature, where case studies are provided and assessed in details and critically
discussed.
Theories, findings and hypothesis are collected through primary sources and a field
research will be directly undertaken in Italy, where people involved in the ski resort
businesses are questioned about physical and human resources management topics, using
a qualitative survey.
Italian interviewed people are actually covering management positions within the
Tourism sector as well as within other different sectors where management skills and
knowledge are required at their professional levels, this will enforce the credibility for
primary data collected in Italy during informal meetings at Pian del Frais; each contacted
individual has its written profile in the research appendix.
To better understand the ski resort company, a quantitative pilot survey has been done to
identify the type of customers Pian del Frais has throughout the year; another quantitative
survey was made to obtain all the data required to assess whether the introduction of a
BPR methodology would suit within Frais2010.
The language used for the surveys and interviews is Italian as well as most of the
collected primary data concerning the ski resort and Frais2010;summarised English
version of those transcripts can be found in the appendix.

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Reengineering is a fundamental rethinking and redesign of business processes to
achieve dramatic improvements
BPR has emerged from key management traditions such as scientific management
and systems thinking
Rules and symbols play an integral part of all BPR initiatives
Dont assume anything - remember BPR is fundamental rethinking of business
processes

BPR Principles
Organize around outcomes, not tasks.
Have those who use the output of the process perform the process.
Subsume information-processing work into the real work that produces the
information.
Treat geographically dispersed resources as though they were centralized.
Link parallel activities instead of integrating their results.
Put decision points where the work is performed and build controls into the
process.
Capture information once and at the source.
Conclusion
To be successful, business process reengineering projects need to be top down, taking in
the complete organization, and the full end to end processes. It needs to be supported
by tools that make processes easy to track and analyze.





The Definition of BPR
It is argued by some researchers (for example, van Meel et al., 1994; MacIntosh and
Francis, 1997;
Peltu et al., 1996) that there is no commonly agreed definition of BPR. Peltu et al.
consider that this lack
of an accepted definition of BPR makes it difficult to assess the overall success or failure
of its concept.
Thus it is essential to make clear what the definition of BPR is before we propose any
framework and
techniques for BPR. The book Reengineering the Corporation: A Manifesto for Business
Revolution by
Hammer and Champy (1993) is widely referenced by most BPR researchers and is
regarded as one of the starting points of BPR. The following is their definition of BPR:
[Reengineering is] the fundamental rethinking and radical redesign of business processes
to achieve dramatic improvements in critical, contemporary measures of performance,
such as cost, quality, service and speed.
Another BPR father, Davenport (1993), describes business process redesign as:
... the analysis and design of workflows and processes within and between organisations.
Business activities should be viewed as more than a collection of individual or
even functional tasks; they should be broken down into processes that can be designed
for maximum effectiveness, in both manufacturing and service environment.
These definitions suggest that we should concentrate on processes rather than functions
(or structures)
as the focus of the (re-)design and management of business activity. The definitions of the
term process by different researchers are also slightly different. For example, Hammer
and Champy (1993)
define a process as: a collection of activities that takes one or more kinds of input and
creates an output that is of value to the customer.
For Davenport (1993) it is:
A process is a specific ordering of work activities across time and space, with a
beginning, an end, and clearly identified inputs and outputs: a structure for action. (p. 5)
And Warboys et al. (1999) define a process as:
A process is structured change, i.e. there is a pattern of events which an observer may
recognise across different actual examples (or occurrences) of the process, or which
may be made manifest, or implemented, in many different occurrences.
In BPR, the process to be reengineered is the so-called business process. Davenport
describes a business process as simply a structured, measured set of activities designed
to produce a specified output for a particular customer or market. Riemer (1998)
describes business processes in an object-oriented style: business processes are series of
steps that change states of business objects (that is, customers, orders and inventory),
thereby causing business events. However we should note that BPR is concerned
with customer-orientation. Thus the outputs of business processes should not only achieve
the companys objectives, but also need to satisfy customers requirements. From these
definitions we can conclude that business processes start and end with customers, and the
value of business processes is dependent upon customers.
Conclusion
The reengineering profoundly changes all aspects of business and people. Part of the
organisation is easy to change by reinventing a way to work. However, the other part, people, is
to improve its service and the efficiency of its operation. One such program was electronic data
interchange, which provided daily information from the retail stores to P&G. The installation of
the system resulted in better service, reduced inventory levels, and labor-cost savings. Another
approach, the continuous replenishment program, provided additional benefits for P&G as well
as for its retailer customers. Eventually, the entire ordering system was redesigned, with the
result of dramatic performance improvements. The reengineering efforts also required
restructuring of the organization. P&G had been known for its brand management for more than
50 years. But in the late 1980s and early 1990s, the brand management approach pioneered by
the company in the 1930s required rethinking and restructuring. In a drive to improve efficiency
and coordination, several brands were combined with authority and responsibility given to
category managers.
Such a manager would determine overall pricing and product policies. Moreover, the category
managers had the authority to withdraw weak brands, thus avoiding conflict between similar
brands. They were also held responsible for the profit of the product category they were
managing. The switch to category management required not only new skills but also a new
attitude.